Tuesday, April 22, 2014

The SBA and scrutate

Scrutation of the
Code of Federal Regulations reveals that Section 120.102 was eliminated on April
21, 2014.

That means the
personal resources test is gone. Owners are no longer required to inject
personal liquid assets to reduce the amount of SBA guaranteed funds that would
otherwise be needed.

_____________________________________Indices:

PRIME
RATE= 3.25%

SBA
LIBOR Base Rate April 2014 = 3.15%

SBA
Fixed Base Rate April 2014 = 5.51%

________________________________________

SBA
504 Loan Debenture Rate for April

The
debenture rate is only 3.11% but note rate is 3.16% and the effective yield is
5.192%.

________________________________________________

AHEAD
OF THE YIELD CURVE

Is
inflation beginning to rear its ugly head?

Not
if you scrutate the data.

Last
week the Bureau of Labor Statistics reported the Consumer Price Index rose 0.2%
(2.4% annualized rate) in March. Prices rose 1.5% for the 12 months ending in
March. That is up from February’s year-over-year reading of 1.1%. This jump
from February to March is because a 0.2% drop in consumer prices in March 2012
dropped out of the calculation.

Really
driving up the CPI was a 0.3% increase in shelter costs. On an annual basis,
shelter costs were up 2.7%, the fastest pace in six
years.

One of the Fed’s
favorite gauges of the economy is the capacity utilization rate which measures
how much plants and factories are being used. The Federal Reserve watches
capacity utilization rates to see if production constraints are threatening to
cause inflationary pressures. Bottlenecks or shortages often lead to
inflationary pressures that would drive prices even higher. Several analysts
have pointed to a rate between 81% and 82% as a tipping point over which
inflation is spurred. The Federal Reserve typically won’t initiate increases in
interest rates until
then.

Here is what
capacity utilization rates have
done:

1997-
83.6

1998-
83.0

1999-
82.4

2000-
82.6

2001-
77.4

2002-
75.6

2003-
74.6

2004-
79.2

2005-
80.7

2006-
82.4

2007-
81.5

2008-
79.9

2009-
66.9

2010-
74.8

2011-
76.7

2012-
79.0

2013-
77.8

2014-
79.2

What does all this
mean?

I don’t
know.

Last week the Fed
reported that capacity utilization for total industry moved up 0.1 percentage
point to 79.2 percent.

That’s up 12.3 percentage points from the
record low set in June 2009 and 1.2 percentage points higher than a year prior.
Capacity utilization at 79.2% is still 0.9 percentage points below its average
from 1972 to 2012 and below the pre-recession level of 80.8% in December
2007.

The
30-year Treasury bond yield serves as somewhat of a long-term outlook on
economic growth and inflation expectations. But the security has at times been
an early indicator for movements in other Treasury maturities.

April’s $13
billion auction of 30 year Treasury bonds sold at a yield of 3.525%. In March
the auction drew a yield of 3.630% compared to
February’s yield of 3.69%. January’s auction sold at a yield of 3.899% compared
to December’s 3.90%.

The
yield curve is starting to flatten out a bit. The slope of the yield curve—the
difference between the yields on short- and long-term maturity bonds—has
achieved some notoriety as a simple forecaster of economic growth. A flat curve
indicates weak growth, and conversely, a steep curve indicates strong
growth.

Traders
are betting the Federal Reserve won’t raise interest rates any time
soon.

__________________________________________OFF
BASE

Scrutating
the calendar meant yesterday was a holiday.

The
third Monday in April is Patriot's Day commemorating the battles of Lexington and Concord, the first military engagements of the
American Revolutionary War.

The
day after the battle, John Adams left his home to ride along the battlefields.
He declared that "the Die was cast, the Rubicon
crossed."

“Crossing
the Rubicon" is a metaphor for deliberately proceeding past a point of no
return. The phrase originates with Julius Caesar's seizure of power in the
RomanRepublic in 49 BC. Roman
generals were strictly forbidden from bringing their troops into the home
territory of the Republic in Italy. Caesar led his army across
the RubiconRiver, crossing from Gaul into Italy. After
this, if he did not triumph, he would be executed. Therefore the term "the
Rubicon" is used as a synonym to the "point of no
return".

"Alea
iacta est" ("The die is cast"), which is reportedly what Caesar said at the
crossing of the Rubicon. This metaphor comes from gambling with dice: once the
die or dice have been thrown, all bets are irrevocable, even before the dice
have come to rest.